The justices rejected appeals from Xavier University and 68 other individuals and businesses seeking to allow their lawsuits against the insurers to go forward.

Xavier asked the court to step in after the 5th U.S. Circuit Court of Appeals ruled that the policies did not cover damage from floods, even those that resulted from man-made failures such as the collapsed levees in New Orleans.

Other cases working their way through state courts have so far reached differing conclusions. A Louisiana appeals court has said that language excluding water damage from some insurance policies was ambiguous. The Louisiana Supreme Court will hear arguments in that case on Feb. 26.

Xavier and the other plaintiffs had asked the federal court to allow the state Supreme Court to rule on their suits as well. The 5th Circuit refused and the U.S. high court upheld that ruling on Tuesday.

Insurance Commissioner Kevin McCarthy had suspended Allstate on Wednesday from writing new policies because it had not fully complied with a subpoena to testify about its property insurance business.

The 10-day stay by the Florida First District Court of Appeal allows Allstate's more than 1,100 Florida agents to continue doing business, the insurer said in a statement.

In addition to car insurance, Allstate provides home insurance in Florida through Allstate Floridian Insurance and Allstate Floridian Indemnity, two independent subsidiaries of the parent company.

Allstate officials had appeared before state regulators earlier this week to testify on proposed rate increases of up to 41 percent in Allstate's property insurance business.

But state officials called off the hearing when Allstate officials refused to answer questions and to provide specific documents.

State investigators have been trying to determine if Allstate and other companies colluded to prevent property insurance rates from dropping despite legislative action last year to reduce premiums.

The issue is a major one in Florida, which has been reeling from a deteriorating real estate market and huge increases in premiums after eight hurricanes in 2004 and 2005, when insurers paid out about $35 billion in claims.

The suspension mainly affected new auto policies, since Allstate had said previously it planned to reduce its homeowner policy exposure in Florida while increasing its 14 percent share of the state's auto insurance business.

Radian Group Inc. (NYSE: RDN) issued a statment following recent volatility in the financial markets, which has affected its stock price.

The company said, "the company has a strong capital position and balance sheet. We believe actions taken during the third quarter, including the sale of the Sherman interest for approximately $278 million and the draw down of $200 million of the $400 million revolving credit facility, provide the company with financial flexibility and adequate liquidity for the long term."

Radian Group will report third quarter results on November 1st.

Shares of Radian Group sank 23.6% today to a new 52-week low. The stock closed at $9.99 today. A dividend cut from competitor MGIC Investment Corp. (NYSE: MTG) expanding the decline.

Today, the 5th Circuit plans to hear an appeal on a Mississippi-based Katrina insurance coverage claim. The trial judge told these policyholders, a couple who believes their home suffered $130,253 in damages from the storm, that their policy did not cover damage resulting from a combination of water and wind. This distinction has been the subject of a great number of Katrina-related insurance disputes.

Last week, the 5th Circuit ruled against Katrina-affected insurance policyholders and overturned a U.S. District Court ruling that insurance companies had to pay its policyholders’ Katrina-related claims. The previous ruling held that ambiguous policy provisions made it unclear which forms of storm damage were covered, while the most recent ruling states that the policy is unambiguous.

"This event was excluded from coverage under the plaintiffs' insurance policies, and under Louisiana law, we are bound to enforce the unambiguous terms of their insurance contracts as written," Judge Carolyn King wrote for a three-judge panel of the 5th U.S. Circuit Court of Appeals.

As a result, the panel found those who filed the suit "are not entitled to recover under their policies," she said.

More than a dozen insurance companies, including Allstate and Travelers, were defendants. Becnel said he planned to appeal. Xavier University said it would seek a rehearing, insisting the matter is ultimately one that should be decided by Louisiana courts.

John Houghtaling, an attorney representing 400 property and business owners in claims against insurers, agreed. He's not involved in this case but is set to argue one with similar issues before a state appeals court next month. He ultimately expects the Louisiana Supreme Court to weigh in on the exclusion issue.

"People from New Orleans need to realize this is not final," he said. "This is halftime."

King said the federal appeals judges used their "best judgment" in trying to determine how the state's high court would settle the issue if it had the case the panel decided Thursday.

The decision overturns a ruling by U.S. District Judge Stanwood Duval Jr., who in November sided with policyholders arguing that language excluding water damage from some of their insurance policies was ambiguous.

Duval said the policies did not distinguish between floods caused by an act of God -- such as excessive rainfall -- and floods caused by an act of man, which would include the levee breaches following Katrina's landfall.

But the appeals panel concluded that "even if the plaintiffs can prove that the levees were negligently designed, constructed, or maintained and that the breaches were due to this negligence, the flood exclusions in the plaintiffs' policies unambiguously preclude their recovery."

"Regardless of what caused the failure of the flood-control structures that were put in place to prevent such a catastrophe, their failure resulted in a widespread flood that damaged the plaintiffs' property," and policies clearly excluded water damage caused by floods, King wrote.

This was a consolidated case, including about 40 named plaintiffs, including Xavier University, and more than a dozen insurance companies. It is just one of the cases pending in federal court over Katrina damage. The Army Corps of Engineers faces thousands of claims for damage resulting after the levees breached; King noted in her opinion that dozens more cases, some consolidated and involving property owners suing insurers, are pending in federal court in New Orleans.

Rossmiller, who is not involved in Katrina-related litigation, said the appeals panel's ruling wasn't surprising.

"The 5th Circuit got it right," he said. "This was an easy one."

Representatives of Illinois-based Allstate and Minnesota-based Travelers said their companies were pleased with the court's findings.

Insurance companies typically restrict property coverage to damage caused by wind, fire and other hazards. Congress launched the National Flood Insurance Program in 1968 to help homeowners living in flood-prone areas get flood insurance to complement private policies. Private agents sell the federal policies, which are often subsidized by taxpayers because premiums don't factor in the real risks of damage.